TaxTMI 
TaxTMI 
2025 (11) TMI 958
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....ank with respect to various obligations as reporting entity, under PMLA read with Prevention of Money Laundering Rules 2005. Thereafter, inspection was conducted on 02.01.2018 and 05.01.2018 of the Appellant Bank for the review period from 01.04.2016 to 30.11.2017. The Respondent sought for information from the Appellant vide its letters dated 05.03.2018 and 04.04.2018. The Appellant responded to these letters and sought guidance from the Respondent as to bring about restructuring of the Anti-Money Laundering Setup of the Appellant Bank. Further correspondence was made in respect of Non-Profit Organisation Transactions (NTR) Reports. A Show Cause Notice (SCN) No. 25-3/Compl/FIU-IND/2018 was issued by the Respondent to the Appellant Bank on 09.11.2018, calling upon the Bank as to why suitable directions including direction of imposition of penalty should not be passed under Section 13 read with Section 12 of PMLA, further read with Rules 3, 7, 8 and 9 of the Rules 2005. 3. Ld. Counsel for the Appellant stated that the Bank is a Public Sector Undertaking and its Officers have neither intentionally nor knowingly indulged in non-compliance of the statutory provisions. In fact, the B....
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.... PML. Rules, inter alia, also require every reporting entity to evolve an internal mechanism for the following: i. maintaining information in such form and manner and at such interval as may be specified by its regulator from time- to-time Rule 5(2) of the PML Rules; and ii. for detecting the transactions referred to in clauses (A), (B), (BA), (C), (D), (E) and (F) of Rule 3(1) of the PML Rules, i.e., for cash transactions, suspicious transactions, etc. - Rule 7(3) of the PML Rules. Ld. Counsel for the Respondent prayed for taking up for consideration each non-compliance, so as to ascertain the correctness and the fairness of the Impugned Order. He however prayed that the Appeal may be dismissed as it does not have any merit. 5. We have considered the rival submissions and perused the case records. To evaluate the merit of the arguments made by both the sides, each allegation against the Appellant of non-compliance is being taken up ad seriatim. 6. The alleged non-compliances relate to Section 12 read with Rules of 2005. It would therefore be useful to reproduce the Section and the relevant Rules as follows: "12. Reporting entity to maintain reco....
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....or a document has taken place facilitating the transactions; (D) all suspicious transactions whether or not made in cash and by way of: (i) deposits and credits, withdrawals into or from any accounts in whatsoever name they are referred to in any currency maintained by way of: (a) cheques including third party cheques, pay orders, demand drafts, cashiers cheques or any other instrument of payment of money including electronic receipts or credits and electronic payments or debits, or (b) travellers cheques, or (c) transfer from one account within the same banking company, financial institution and intermediary, as the case may be, including from or to Nostro and Vostro accounts, or (d) any other mode in whatsoever name it is referred to; (ii) credits or debits into or from any non-monetary accounts such as d-mat account, security account in any currency maintained by the banking company, financial institution and intermediary, as the case may be; (iii) money transfer or remittances in favour of own clients or non-clients from India or abroad and to third party beneficiaries in India or abroad including transacti....
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....he duty of every reporting entity, its designated director, officers and employees to observe the procedure and the manner of maintaining information as specified by its regulator under sub-rule (1). 7. Procedure and manner of furnishing information. - 1) Every reporting entity shall communicate to the Director the name, designation and address of the Principal Officer. (2) The Principal Officer shall furnish the information referred to in clauses (A), (B), (BA), (C) and (D) of sub-rule (1) of rule 3 to the Director on the basis of information available with the reporting entity. A copy of such information shall be retained by the Principal Officer for the purposes of official record. (3) Every reporting entity shall evolve an internal mechanism having regard to any guidelines issued by the Director in consultation with, its regulator, for detecting the transactions referred to in clauses (A), (B), (BA), (C) and (D) of sub-rule (1) of rule 3 and for furnishing information about such transactions in such form as may be directed by the Director in consultation with, its Regulator. (4) It shall be the duty of every reporting entity, its des....
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....Appellant failed to comply with these provisions in as much as it filed/refiled CTRs (Cash Transactions Reports) with a cumulative delay of 151 months. However, on consideration of the fact that the Appellant had filed CTRs for the respective months, the contention of the Appellant that the CTRs were refiled due to technical inaccuracies was accepted. It was noted in the Impugned Order that as per details mentioned therein there were CTRs which had been filed for the first time with cumulative delay of 38 months. The Appellant has taken the plea that the delay has been generally on account of recurring issues at FIU-IND Portal in Login or Upload of Files. The argument raised by the Appellant regarding technical difficulties has been rejected since such difficulties could not have persisted for 15 days continuously and a CTR is required to be filed after every 15 days. It was also found that the Bank did not have any effective internal mechanism for detection of such transactions. We find that the Director, FIU-IND has been reasonable in accepting the contentions of the Appellant, so as to reduce the cumulative delay from 151 months to 38 months by holding that wherever CTRs were re....
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....lay per month has not been stated. We therefore, cannot sustain this penalty and drop the penalty amount of Rs. 22,40,000/-. We further observe that filing of 343 STRs with incomplete and inaccurate Ground of Suspicion (GoS) tantamount to non-filing of STRs. We therefore uphold the penalty amount of Rs.34,30,000/- at the rate of 343 STRs multiplied by Rs. 10,000/- per STR. Penalty of Rs. 1,00,000/- has been imposed for failure to have effective internal mechanism. The Appellant has pleaded that the failure to have effective internal mechanism should not have invited penalty for each non-compliance. We agree with this pleading and set aside the penalty of Rs. 1,00,000/- as well. 9. The third allegation relates to non-compliance of Section 12(1)(a) and (b) of the Act read with Rules 3 (1) (BA), 7 (2), 7 (3) and 8 (1). In this regard, it has been informed in the Impugned Order that there is a cumulative delay of 127 months in filing/refiling information regarding 142820 transactions reportable as NTRs (Non-Profitable Organisation Transaction Report). Penalty of Rs. 12,70,000/- at the rate of 127 months multiplied by Rs. 10,000/- per month of delay has been imposed. The allegation r....
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....n in the pleadings made so as to disagree with the said penalty amount. 12. There are certain other observations which are adverse to the Appellant that have been made in the Impugned Order for which no penalty has been imposed. It has been specifically observed in the Impugned Order that a lenient view has been taken with regard to the several non-compliances of Rule 9. Four of these non-compliances have been identified as lack of verification of beneficial owners, failure to record any suspicious pattern were multiple transactions just below the threshold were attempted/undertaken by walk-in customers, failure to carry out any risk assessment relating to money laundering and terrorist financing for products, services, delivery channels or locations and failure to fully implement Client Due Diligence Programme. 13. We therefore have reduced the total penalty amount from Rs.15,62,90,000/- to Rs. 15,37,50,000/-. The Appellant has also pleaded that why other options provided for under Section 13(a), (b) & (c) have not been explored by the Director FIU-IND. We find that except for failure to have effective internal mechanism where for penalty of Rs. 1,00,000/- has been imposed, ....
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....ulted in quasi-criminal proceedings. It is not a case in hand. However, the judgment of the Apex Court in the case of Hindustan Steel Ltd. (supra) was distinguished in the subsequent judgment. 29. The appellant further referred to the judgment of the Delhi High Court in the case of Paypal Payments Pvt. Ltd. (supra). Therein, the judgment is largely based on the judgment in the case of Hindustan Steel Ltd. (supra). We find that in the judgment of the Delhi High Court relied upon by the appellant in the case of Paypal Payments Pvt. Ltd. (supra), the parties before the High Court did not refer to the subsequent judgment wherein the earlier judgment of Hindustan Steel Ltd. (supra) was distinguished. Elaborately, these facts have been given by the respondent who have relied upon the subsequent judgment of the Apex Court in the case of SEBI Vs. Cabot International Capital Corporation (2005)123 Comp Cases 841 and also the judgment in the case of Chairman, SEBI Vs. Shriram Mutual Fund & Anr. (2006(5) SCC 361). The relevant paragraph of the judgment in Shriram Mutual Fund (supra) is quoted thus: "However, we are not in agreement with the appellate authority in respect of t....
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....hat penalty is attracted as soon as the contravention of the statutory obligation contemplated under the Act or Rules is established. Thus, the intention of the parties committing such violation becomes wholly irrelevant. The breach of civil obligation attracts the penalty and cannot be taken to be a quasi-criminal proceeding. Therefore, the order passed by the Tribunal therein was interfered. 31. It was also held that unless the language of the statute indicate need to establish the presence of mens rea, it is wholly unnecessary to ascertain whether such a violation was intentional or not. The later judgment of the Supreme Court applies to the facts of the case and inadvertently it was not cited before Delhi High Court which has relied on the judgment of the Hindustan Steel Ltd. (supra). We further need to refer the word `transaction' as defined in sub rule (h) of Rule 2 which reads as under: "2(h) "transaction" includes deposit, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means" 32. Section 12(1)(b) requires reporting entity to fur....